Sharekhan is bullish on Apollo Tyres has recommended buy rating on the stock with a target price of Rs 135 in its research report dated August 06, 2020.
Sharekhan's research repor on Apollo Tyres
Apollo Tyres Limited (ATL) Q1FY21 results were ahead of estimates, mainly driven by better-than-expected revenues. A sharp recovery in replacement demand in both domestic as well as the European businesses helped revenue exceed estimates.. With the government opening up the economy, domestic replacement demand has recovered sharply and has exceeded expectations. Also, with Govt move to restrict tyre imports, ATL is likely to benefit. European replacement sales are also recovering with opening up of economy. With better product mix, cost control measures and restructuring in European operations we expect margins to improve and expect strong 39% earnings CAGR over FY2020-22 period. Renowned private equity firm Warburg Pincus subscribing to compulsorily convertible preference shares in March 2020 (convertible at a price of Rs 171.4 per equity share and resulting in equity stake of ~10%) exudes confidence.
Outlook
Hence, we retain a Buy rating on the stock with unchanged PT of Rs 135.
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